Genussscheine

Genussscheine are investment certificates issued by companies, municipalities, or other issuers that give the holder a right to participate in the issuer’s profits and, in some cases, to a share of liquidation proceeds. They do not confer ownership in the company and typically do not carry voting rights. As hybrid securities, Genussscheine sit between debt and equity, with terms defined in individual certificate contracts.

Rights and structure vary by issue. Returns can be fixed, variable, or linked to the issuer’s profitability, and some certificates include a capital repayment component. In many cases, Genussscheine are subordinate to other creditors, increasing risk for investors. They are not standard equity and usually lack typical corporate governance rights; liquidity depends on market demand or the availability of a secondary market, and may be limited.

Regulation and risk considerations. In many jurisdictions, Genussscheine are treated as securities and require appropriate disclosure when offered publicly; private placements may be exempt from certain prospectus requirements. They often offer higher yields than traditional debt but come with higher credit risk and potential loss of capital. Investor suitability and careful review of contract terms are essential, especially regarding insolvency treatment and priority of claims.

History and use. Genussscheine originated in German-speaking regions as a way to raise capital without issuing new equity. They were widely used by industrial firms and banks in the 19th and early 20th centuries and remain in use by various issuers today, including family businesses and project developers, though terms and risk profiles vary significantly.